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| Value-added Tax versus Social Security Contributions |
| In order to alleviate unemployment it is often recommended to reduce social security contributions (SSC) and to compensate for the ensuing loss in revenues by a rise in the value-added tax (VAT). Assuming unemployment to be caused by efficiency wages, it is shown that a balanced-budget shift from a payroll tax to a VAT will increase employment if the rise in the VAT does not alter consumer prices. If the effects of a shift from SSC to the VAT on the worker?s effort are neutralised, for example, by imposing a constant wedge, the employment impact will depend on the nature of the unemployment compensation system. |
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| Autor |
| Univ.-Prof. Dr. Laszlo Goerke |
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| Disccussion Paper | | Fachbereich | | Fachrichtung | | 2005 | | Volkswirtschaftslehre | | Volkswirtschaftspolitik |
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| Schlagwörter |
| Efficiency wages, social security contributions, unemployment, value-added tax |
